Girlfriend Guru MIATA EDOGA shares financial advice for the difficult times. Have you been there? Can you share your ideas for girlfriends to get through the hard times?
Cover Your Downside … then back down on the insurance later.
I’m not surprised when I see people with budget trouble cutting corners. I know the feeling. When life happens your budget begins feeling like the Titanic and you’re throwing everything overboard to try and save the ship.
Generally, though, cutting expenses in a panic leads to bad decisions. We nearly always pick the wrong areas to cut in our attempt to fix the problem.
The best idea, at least initially, seems to be to cut insurances. Why? That’s easy. If you can just hang on and not have anything bad happen for a few months, you’ll find your way to safety.
This strategy doesn’t work. When I meet people who are at the bottom financially, their sad story often starts with the move to cut insurance. Calamity strikes, there’s no insurance in place and nowhere else to go for money, and the whole financial ship sinks.
I know it sounds hard, but the last place you want to cut is insurance. The good news is that when you have an emergency fund, you’ll be able to recover more quickly, because I’ll recommend making some insurance cuts.
Here’s what I mean:
If you have a tendency to get sick often, make no moves. However, if you have a clean bill of health, look toward a high deductible plan once you have a reserve in place. A high deductible plan can be dangerous without a cash reserve. However, once you have one, you’ll pay out-of-pocket expenses until you reach your deductible limit.
Initially, look for insurances with low deductibles. A collision could be catastrophic for your financial picture. A friend in Atlanta recently had her car stolen. While the car was only worth $1,500, imagine how devastating this would have been if she hadn’t had any insurance! Cut unnecessary coverage such as auto towing and ask your agent about coverage levels. Often your agent will have suggestions that can safely lower the amount of insurance you keep. Again, just like with health insurance, when you’ve built up a financial reserve you can raise your deductibles.
You can see where I’m going with this, can’t you? Start with a low deductible plan that covers everything until you have an emergency fund. Then, look for a high deductible plans that cut your cost dramatically.
The strategy is simple, and the opposite of most “panic” thoughts: leave significant insurance in place until you have a reserve and then raise your deductibles. This will allow you to stay safe during the difficult times and accelerate your path to financial freedom as you build wealth.
MIATA EDOGA is the President and Founder of Abundance Bound, a 10-year old company committed to utilizing humor, inspiration, and lots of love to give individuals around the world the necessary tools to thrive financially, while keeping focus on the things they treasure most. Visit the Abundance Bound Facebook Page for your free copy of Financial Success for the Creative Soul!
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